During the 2020 tax filing season we handled an increasing number of tax returns where individuals had multiple employers. Closures of businesses were an issue Canada wide. Reduced operating hours became common place, and forced many to take up multiple employments in order to maintain the income levels to which they were accustomed. We imagine the case will be the same for the upcoming 2021 tax filing season, but how exactly can multiple employments during the tax year affect your tax return?
Have your employers been taxing you correctly?
Some employers, especially smaller or new businesses are not always the most organized when it comes to managing their payroll and tax deductions from their employees pay. This can cause problems when it comes to tax filing at year end, as we often see T4s where the employer has made quite substantial errors over many pay periods where the individual had been taxed incorrectly. We have seen cases where individuals have earned over $15,000 without having a cent of income tax deducted from their pay. These types of payroll deduction errors can result in large tax balances owing to CRA (Canada Revenue Agency) at year end, which often comes as a surprise to the individual filing their tax return.
When an individual has more than one employer, the additional employers should be deducting tax at a higher rate than the first employer, to take into consideration the pay that has already been earned for the year to date from that first employer. If multiple additional employers are all taxing pay at a lower rate than required this will most likely result in a tax balance owing to CRA at year end.
What happens if you have a tax balance owing?
It is not great news to find out that you owe money to CRA at year end (especially with the increasing accommodation rental rates in Vancouver and other Canadian cities), however it is not the end of the world! It is actually quite common for an individual to have a tax balance owing, and as long as your tax return is filed before the deadline and the tax balance paid to CRA on time, you will not be penalized. This is why it is important to submit your taxes to CRA on time, to avoid penalties on tax balances owed to CRA.
How can you ensure that you do not have a tax balance owing at year end?
When you start working for an additional employer during the tax year you should inform them of your current employment status. By informing your employer of your year to date income from another employer, they will be able to tax your pay at the correct rate, this means you will not be undertaxed on your pay and therefore owing tax to CRA at year end.
You cannot locate your T4 from your previous employer and they are not responding to your requests for a new T4
If you cannot find T4s from all of your employers for the tax year you can either log into your CRA account online to download your T4 slips, or call CRA and request that they mail a copy to you. If you are close to the tax filing deadline and do not have time to receive a copy from CRA or set up your online CRA account, we offer a $30 tax slip download service whereby we can access your tax slips online and download them for you.
Do you have any questions or need assistance with your tax return filing?
If you have any questions regarding your deductions from your pay cheques, issues with your employer correctly deducting your pay or any other tax related queries, please get in touch with the team at firstname.lastname@example.org or visit our Vancouver office* and we will be more than happy to assist you. Tax doesn’t have to be taxing!
*At the time of publishing our Vancouver office is not open for visits due to COVID-19. Please reach our team via email – email@example.com